NTPC to float new order for $4.2 billion

NTPC Ltd plans to float a tender to supply super critical equipment valued at $4.2 billion (around Rs19,200 crore) in a move that should bring some cheer to power equipment makers, but only those who manufacture in India because that will be a condition in the tender.

By doing so the tender rules out imports from China; over the past year, Indian power equipment makers have lobbied against cheaper imports from China.

The equipment NTPC wants to buy will help NTPC achieve higher plant efficiencies and economies of scale, besides being environment-friendly.

The tender will be for around eight units of 800MW.

“The specifications are ready. We will send the notice inviting tender documents to the power ministry for their approval, who in turn will take a cabinet approval for this,” said a senior NTPC executive who did not want to be identified.

NTPC had recently floated another tender worth around Rs18,000 crore for supercritical power projects, inviting bids to supply 11 boilers and 11 turbines of 660MW each.

“The 800MW unit size tender will be on the lines of the previous tender. It will be a two-stage tender involving technical and commercial bids. For the earlier tender the scrutiny is on and we expect to award it by July,” said a second NTPC executive who also did not want to be identified.

The earlier tender had specified that the winner would have to set up factories in India to develop the local power generation equipment manufacturing industry. It also guaranteed state-owned Bharat Heavy Electricals Ltd (Bhel) an assured order. The tender stated that the lowest bidder for boilers would be given an order for six units. If Bhel was not the lowest bidder, the government would award it the order for the remaining five units, provided it agreed to match the lowest bid, said that tender. If it did not, the option would be given to others in the order of bid ranking. The same system would be followed for ordering turbines.

The “domestic manufacturing” clause helps the cause of Bhel and joint venture companies such as Toshiba Corp. of Japan along with JSW Group; Ansaldo Caldaie SpA of Italy and GB Engineering Enterprises Pvt. Ltd; Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd of Japan; and Alstom SA of France and Bharat Forge Ltd. It, however, is to the disadvantage of Chinese companies such as Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. and Harbin Power Equipment Co. Ltd.

“A lot of private firms have plans to enter the power generation equipment manufacturing space. Such orders will help expand the domestic capacity. Of 100,000MW capacity planned for the 12th Plan (2012-17) around 40% is super critical,” said Rupesh Sankhe, an equity research analyst at Angel Broking Ltd.

In a related development, the utility announced on Monday that it registered a nearly 5% drop in fourth quarter net profit to Rs2,017.65 crore compared with Rs2,113.35 crore in the year-ago period.

The utility’s net sales increased to Rs12,353.39 crore during the March quarter from Rs11,445.78 crore during the corresponding period last year.

For the year ended 31 March, profit rose 6.42% to Rs8,728.20 crore on revenue of Rs46,322.59 crore.